United States v. Hickey
| Decision Date | 04 April 1966 |
| Docket Number | No. 15015-15018.,15015-15018. |
| Citation | 360 F.2d 127 |
| Parties | The UNITED STATES of America, Plaintiff-Appellee, v. Ralph T. HICKEY, Frank J. Graves, Raymond J. Heiderscheidt, Joseph M. Kearns and James Graves, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
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Robert J. Leali, Woodstock, Ill., for defendant-appellant Ralph T. Hickey; Carroll, Leali & Gitlin, Woodstock, Ill., of counsel.
Thomas P. Sullivan, Hugh M. King, Chicago, Ill., for defendants-appellants Frank J. Graves, Raymond J. Heiderscheidt, Joseph M. Kearns and James Graves; Raymond, Mayer, Jenner & Block, Chicago, Ill., of counsel.
Edward V. Hanrahan, U. S. Atty., John Peter Lulinski, John Powers Crowley, Barry J. Freeman, Asst. U. S. Attys., Chicago, Ill., for appellee, Lawrence Jay Weiner, Asst. U. S. Attys., of counsel.
Before SCHNACKENBERG, KNOCH, and SWYGERT, Circuit Judges.
The defendants appeal from jury verdicts of guilty on one or more counts of a three-count indictment charging them with conspiracy to defraud a federally insured savings and loan association through fraudulent misapplication of its funds, 18 U.S.C. § 657,1 and fraudulent participation in loans issued by it, 18 U.S.C. § 1006.2 All five defendants, Ralph T. Hickey, Frank J. Graves, James Graves, Raymond J. Heiderscheidt, and Joseph M. Kearns, were found guilty of conspiracy. With two exceptions, guilty verdicts were also returned as to all defendants on the substantive counts in which Hickey was charged as a principal and the other defendants as aiders and abettors. Heiderscheidt and Kearns were found not guilty on the count charging fraudulent misapplication of funds and Kearns was acquitted on the count charging fraudulent participation in the proceeds of an association loan.
The facts are complicated. A capsule summary of the transactions which gave rise to the criminal prosecutions will be given before proceeding to a more complete recitation of the relevant evidence.
Ralph Hickey controlled and was the managing officer of Concord Savings and Loan Association, Chicago, Illinois. He caused Concord to issue two mortgage loans totalling $350,000. The proceeds of these loans were used by Frank and James Graves to acquire title to certain parcels of real estate which nominally secured the loans themselves and to purchase control of Concord from Hickey for $250,000. The transfer of control of Concord was made pursuant to a formal agreement between Hickey and Frank Graves secured by a stock escrow for which Joseph Kearns provided the stock. Frank Graves, Kearns, and Raymond Heiderscheidt became directors of Concord immediately following the transfer of control.
The detailed facts surrounding and material to those just recited began early in 1960. They will be traced chronologically for the most part, although the pattern will at times be broken for purposes of explanation.
On January 20, 1960, Ralph Hickey acquired control of Concord Savings and Loan Association through the purchase of a related insurance agency for $126,000. Before many months had passed, he began looking around for someone to buy Concord. In the late spring of 1960 Hickey quoted an asking price of $250,000 to a mortgage broker and realtor named Milton Price. Hickey told Price that if a buyer could be found he would be willing to help generate cash for the purchase by causing Concord to make mortgage loans to the prospective buyer in an amount sufficient to cover the cost of acquiring control of Concord.
At that time Price was sharing office space in the Chicago loop with Frank Graves, Graves' son James, and Graves' son-in-law Raymond Heiderscheidt.3 Price related Hickey's proposal to James Graves and the latter relayed the information to his business associates. Interest in Hickey's offer was expressed, and sometime in July 1960 Price arranged a meeting at the Concord offices attended by all the defendants except Kearns. Precisely what agreements were reached at that meeting will perhaps never be known, but essentially the Graveses and Heiderscheidt agreed to line up property which would support an appraisal sufficient to justify a return agreement by Hickey to cause Concord to loan enough money to purchase the property arranged for and leave $250,000 for the purchase by Frank Graves of the lending institution. Further, as shown by subsequent events, it was agreed that the true identity of the borrowers and the disposition and repayment of the loans would have to be camouflaged to avoid suspicion.
The real estate selected by the prospective purchaser of the stock control in Concord as capable of supporting the necessary loan was variously known as the Hartman farm and Hartman Estates. The Graveses considered this property to be at their disposal for reasons which provide the first digression from chronological sequence.
Hartman Estates was a 142-acre farm located just west of McHenry, Illinois. In December 1959, Frank Coquillard and George Hartman, Jr. each had a fifty per cent interest in the property.4 (The farm was subject to a mortgage of about $35,000.) Concluding that this tract possessed subdivision-development possibilities, Coquillard approached James Graves and offered to dispose of his interest. Graves agreed to purchase Coquillard's half interest for $10,000 and a contract to this effect was signed. A few weeks later, Graves persuaded Coquillard and Hartman to place the farm in a trust at the La Salle National Bank, naming Coquillard and Hartman as equal beneficiaries with an equal power of direction. Thereafter, Graves induced Hartman to sign a similar trust agreement naming Frank Graves and Hartman as equal beneficiaries, but with the sole power of direction in Frank Graves. On February 4, 1960, Hartman signed various additional documents at James Graves' request. These documents included an assignment and an agreement by Hartman to sell six per cent of his beneficial interest in the Coquillard-Hartman trust to Frank Graves5 and a contract wherein Hartman and Frank Graves gave each other the right of first refusal on their respective interests in the Hartman trust, based upon a September 1959 appraisal which valued the Hartman farm at $85,200.6 Thus, in this context, the Graveses could deal with Hickey with some assurance that title to the Hartman farm could be obtained.7
Shortly after the Hickey-Graves-Heiderscheidt meeting in July 1960, the parties decided to view the Hartman farm. An inspection was made, but Hickey was not satisfied that the acreage would support an appraisal of the necessary magnitude. A parcel of about ten acres of vacant, unimproved land in Kane County, Illinois, known as the Schoolside subdivision, was then added as available for purposes of the loan, and Hickey was satisfied.8 The amount of the loan required to accomplish the objectives already set forth was eventually settled at $350,000. This figure adequately assured the payment of costs, the purchase of Schoolside and the Hartman farm, and the transfer of Hickey's control of Concord.
The next step was the presentation of the proposed loans to Concord's board of directors. The presentation did not draw attention either to the true nature of the loans themselves or to the identity of the borrowers. On August 8, 1960, upon an application presented by Hickey, the Concord board of directors, unanimously and without reservation,9 approved loans totalling $350,000 on the Hartman and Schoolside properties to the Wood-Stream Construction Company.10 Wood-Stream was a building development firm. It had been contacted with reference to the development of the Hartman farm and Schoolside subdivision, but it had never made application for mortgage or construction loans in connection with these properties. Thus, as of August 8, 1960, Concord had, upon Hickey's representations, authorized a loan of $350,000 to a firm which neither applied for any such loan nor had any interest in the property securing it.
Shortly after the approval of the loan, efforts to secure favorable appraisals and to make legal arrangements for the disbursement of the loan funds and transfer of control in Concord commenced. Frank and James Graves and Heiderscheidt engaged several appraisers with little success. On August 26, 1960, John Enright submitted a preliminary valuation of $70,000 on the Hartman farm and $24,000 on Schoolside. Frank Graves told him not to bother reducing this appraisal to writing. On August 29, 1960, George Duffy submitted a preliminary appraisal setting the value of the Hartman farm at between $155,000 and $185,000. James Graves and Heiderscheidt asked him to inflate this figure to $400,000, but Duffy refused the request as "misleading" and "unethical." Faced with such a lack of cooperation, James Graves pressed another appraiser into service. He prevailed upon M. A. Brown to appraise the Hartman farm and Schoolside as improved property. Brown quickly produced an appraisal of $406,500 on the Hartman farm "as developed with streets, sewer and all utilities" and an appraisal of $70,500 on Schoolside "as improved lots," listing the cost of improvements at $50,000. The Brown appraisals were given to Hickey at Concord on about September 1, 1960. Hickey, of course, knew that both the Hartman farm and Schoolside were unimproved.
Meanwhile, on August 23, 1960, all the defendants except Kearns met with Sherwin Willens, an attorney retained by Hickey, to work out legal details relating to the sale of Concord. Willens was informed that Concord proposed to loan money to the Graveses based upon the security of two parcels owned by them which had been appraised by Duffy at $600,000. Willens was also informed that $250,000 of the loan proceeds was earmarked for the purchase of Concord. Finally, Willens was told that attorney Harold Woodward11 had been chosen to represent Frank and James Graves in the transfer of Concord. Aside from the...
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